Russian firm speaks out on failed refinery talks

Kampala- Just days after the government announced publicly it had suspended negotiations with a Russian consortium, RT Global Resources, for the development of the proposed 60,000 barrels per day (Bpd) refinery; the consortium has said it is still interested and open to talks for the project.

Kampala- Just days after the government announced publicly it had suspended negotiations with a Russian consortium, RT Global Resources, for the development of the proposed 60,000 barrels per day (Bpd) refinery; the consortium has said it is still interested and open to talks for the project.

The coordinator of the consortium, Rostec, a Russian State corporation in a statement to the Russian news agency Interfax.Ru, also said they had offered “to renew negotiations” on the current conditions until September, a proposal that government shot down.
Rostec also blamed government authorities for failing to fulfil obligations under the tender for construction, which they said put them in a difficult situation.

Some of these conditions that remain unfulfilled include granting production licenses to the international oil companies; Total, Tullow and China National Offshore Oil Corporation (Cnooc) to be able to guarantee crude oil in time, and have not been granted tax benefits and conditions of the stabilisation project, accepted in international practice.

Owing to the circumstances, Rostec said it “decided not to extend the bid security for refinery construction, which expired on 30 June”.

“Thus came the end of the warranty period for the fulfilment of obligations on the conclusion of major agreements between the consortium and the government of Uganda.”

Other partners in the RT consortium include VTB Capital, the investment banking unit of Russia’s second-largest lender VTB as lead financiers, and South Korea’s GS and Telconet Capital Partnership for provision of engineering services.

The refinery is estimated to cost about Shs12 trillion ($3.5b), according to recent estimates published during studies for the crude export oil pipeline.

Negotiations between RT and government were concluded and an agreement reached on May 11. The two parties then gave themselves a deadline to secure approvals, seal the deal, and make it public by-end of June.

On April 27, RT’s bosses had visited the country and held back-to-back meetings with President Museveni and the oil technocrats over the deal.
Complications

But just prior to the expected signature date at the beginning of last month, the ministry said, RT made additional demands from government, seeking to reopen and renegotiate issues that had already been agreed between the parties. They then returned the documents unsigned.

Consequently, government was left with no choice but to halt negotiations and withdraw the bid bond. A senior government official said they immediately cashed-in the bond which RT had executed with one local bank and the money is already in a Consolidated Fund.

RT said: “After the expiry of the tender security, government sent to the address of the Custodian Bank bid security (bid bond) instruction on the implementation of the security deposit in the amount of $2 million, without good reason and without notice of the consortium.”

Unrefined business

The Rostec suggested that Uganda continues the talks on the project without collateral. The firm also said it was consulting “on the legal effects” on the side of other partners, should they be willing to continue with the project under revised conditions.

Initially, the Ministry of Energy said it had aimed at clinching all the principle agreements within 60 days. Negotiations, however, prolonged over a period of 14 months, which in essence, could and will affect government’s target of starting commercial oil production by mid-2020 to possibly 2020.Officials from the Russian consortium, RT Global Resources with President Museveni and oil technocrats in the Ministry of Energy after a meeting at State House in April. COURTESY PHOTO